OVERVIEW OF DAMAGES UNDER THE FALSE CLAIMS ACT
Paul D. Scott, Esq.
The False Claims Act (“FCA” or “the Act”) provides
that a person who violates the Act “is liable to the
United States Government for a civil penalty of not
less than $5,000 and not more than $10,000, plus 3
times the amount of damages which the Government
sustains because of the act of that person . . . .” 31
U.S.C. § 3729(a).1
A.
CALCULATING SINGLE DAMAGES
The measure of single damages (subject to trebling
under the Act) is generally the amount of additional
money the United States had to pay as a result of the
false statement or claim. United States ex rel. Marcus
v. Hess, 317 U.S. 537 (1943); United States v.
Woodbury, 359 F.2d 370, 379 (9th Cir. 1966). But the
precise method of determining the amount of the
Government’s overpayment varies depending on the type
of case.2
1
Proof of damages is not required for liability
under the Act. United States ex rel. Harrison v.
Westinghouse Savannah River Co., 176 F.3d 776, 785 n.7
(4th Cir. 1999); United States v. Advance Tool Co., 902
F. Supp. 1011, 1018 (W.D. Mo 1995); United States ex
rel. Thompson v. Columbia/HCA Healthcare Corp., 20 F.
Supp. 1017, 1047-1049 (S.D. Tex. 1998).
2
“No single rule can be, or should be, stated for
the determination of damages under the Act . . .
Fraudulent interference with the government's
activities damages the government in numerous ways that
vary from case to case. Accordingly, the committee
believes that the courts should remain free to fashion
measures of damages on a case by case basis. The
Committee intends that the courts should be guided only
by the principles that the United States' damages
should be liberally measured to effectuate the remedial
purposes of the Act, and that the United States should
be afforded a full and complete recovery of all its
damages.” S.Rep. No. 615, 96th Cong., 2d Sess. at 4.
1
1.
Overbilling/Failure to Deliver
A common type of False Claims Act case involves
overbilling by a contractor for goods or services
provided to the Government. In such cases, the measure
of damages is relatively straightforward. Courts have
simply looked at the additional amount paid beyond what
should have been paid for the products or services
provided (an “out-of-pocket” type analysis) to
determine the Government’s damages. See e.g. United
States v. Halper, 490 U.S. 435 (1989) (in case where
doctor upcoded charges for office visits by patients,
measure of damages the additional amount billed beyond
the amount properly due for the services rendered);
United States v. Grannis, 172 F.2d 507 (4th Cir. 1949)
(false costs included in invoice on cost-plus contract
the measure of damages).
2.
Substandard Products
In United States v. Bornstein, 423 U.S. 303
(1976), the Court endorsed the benefit-of-the-bargain
rule as one possible method of calculating damages in
the context of substandard products sold to the
Government. The defendant in Bornstein was a
subcontractor who supplied substandard radio tubes,
which were then included in radios sold to the
Government. The Supreme Court held that “[t]he
Government’s actual damages are equal to the difference
between the market value of the tubes it received and
retained and the market value that the tubes would have
had if they had been of the specified quality.” Id. at
317 n.13.
Cases interpreting Bornstein’s benefit-of-thebargain rule have held the difference in value can
amount to as much as the full contract value or even
the replacement cost of the product in question.
In United States v. Aerodex, 469 F.2d 1003 (5th
Cir. 1973), the measure of damages was the full amount
of the contract. The defendant in Aerodex had
delivered falsely denominated aircraft engine bearings
to the Navy. Upon discovering the problem, the
Government removed and replaced the bearings with the
correct bearings. The Fifth Circuit thus awarded the
total contract price of $27,000 as damages, holding
that “[t]he Government paid $27,000 for bearings it did
2
not receive.” Id. at 1011. The market value of the
falsely labeled bearings was implicitly assumed to be
zero.
In United States ex rel. Roby v. Boeing Co., 302
F.3d 637 (6th Cir. 2002), the benefit-of-the-bargain
(or diminution-in-value) rule was effectively
interpreted to permit recovery of replacement costs.
In Roby, a subcontractor delivered a defective gear to
defendant Boeing, which included the part in a
helicopter delivered to the Army, and the helicopter
subsequently crashed. Boeing argued that it should
only be liable for the value of the defective gear or,
at most, the $4.1 million it was paid by the Government
for the helicopter.
Id. at 646. The Sixth Circuit
disagreed, noting that the part was “flight critical.”
Id. at 647. In this context, the Government’s damages
equaled “the difference between the market value of
[the helicopter] as received (zero) and as promised.”
Id. at 648. While the Government was not entitled to
damages based on the value of a new helicopter, it was
entitled to the value of a remanufactured helicopter
that met contract specifications.3
A similar result obtained in Commercial
Contractors, Inc. v. United States, 154 F.3d 1357 (Fed.
Cir. 1998). In Commercial, the defendant constructed a
flood canal that was substantially defective, but it
was not possible to determine the actual loss in value
of the product supplied. In this context, the Court
held that the Government could recover the replacement
cost of the channel, so long as it could establish the
defective work undermined the channel’s structural
integrity or the cost of repair was “not clearly
disproportionate to the probable loss in value caused
by the defects in question.” Id. at 1373.
3.
Failure to Test
When the fraud at issue involves a failure to
test, the measure of damages can range from zero to
replacement cost, depending on the facts of the case.
In United States v. Collyer Insulated Wire Co., 94
3
The court noted that the crash of the helicopter
and its contents caused a loss of “at least $10
million.” Id. at 640.
3
F. Supp. 493, 496 (D.R.I. 1950), the defendant
delivered wire to the United States that had not been
tested to the proper specifications, and 51% did not,
in fact, meet specifications. Id. at 498. The
government used the wire, however, and “there were no
complaints relative to the cable.” Id. at 498. In
this context, the court awarded only nominal damages.4
In United States ex rel. Compton v. Midwest
Specialties, Inc., 142 F.3d 296 (6th Cir. 1998), the
defendants failed to perform tests of brake shoe kits
delivered to the Army. Subsequent testing by the
Government indicated that more than 60% of the kits did
not meet contract specifications. Id. at 302. In
light of these facts, in combination with the
Government’s decision not to use the brake shoes after
discovering the lack of testing, the court deemed the
brake shoe kits valueless and awarded the full contract
amount as single damages. Id. at 304-305.
In BMY-Combat Systems v. United States, 44 Fed.
Cl. 141 (1998), the defendant failed to perform
adequate tests on mounting brackets for howitzers
delivered to the Army. The damages awarded by the
court included costs of inspection and repair, costs of
having replacement brackets manufactured as a
precautionary measure, and interest on progress
payments for howitzers whose brackets had not been
inspected. Id. at 148-150.
4.
False Certification of Entitlement to Payment
When false statements are made to qualify for
program payments (e.g., loan guarantees, unemployment
insurance, etc.), the measure of damages is “the amount
that [the United States] paid out by reason of the
false statements over and above what it would have paid
if the claims had been truthful.” United States v.
Woodbury, 359 F.2d 370, 379 (9th Cir. 1966). Cases
applying this standard, however, have varied between
those applying a “but for” theory of damages and those
requiring more direct causation between the fraud and
the Government’s damages.
4 Notably, $210,000 in penalties also were awarded.
Id.
4
For example, in United States v. Ekelman &
Associates, Inc., 532 F.2d 545 (6th Cir. 1976), the
Court applied the “but for” standard to a case
involving false statements regarding creditworthiness
on a loan application to obtain loan guarantees. The
measure of damages applied by the Court included the
guarantee amount along with the costs of maintaining
and repairing the defaulted property until resold. Id.
at 551.
By contrast, in United States v. Hibbs, 568 F.2d
347, 351 (3d Cir. 1977), the defendant falsely
represented to the Government that certain real
property serving as collateral for an SBA-guaranteed
loan met the Federal Housing Administration standards
for plumbing, heating and electrical systems.
The
loan later went into default due to the financial
condition of the mortgagor. The court measured damages
by the difference between the true value of the
collateral and the value of the collateral as
represented on the loan application. The court did not
award the full guarantee payment as damages. The
explanation given by the court was that "the same loss
would have been suffered by the government had the
certifications been accurate and truthful."
Id.
In United States v. First National Bank of Cicero,
957 F.2d 1362 (7th cir. 1992), however, the Seventh
Circuit Court of Appeals specifically rejected the
Third Circuit’s reasoning in Hibbs. In the Seventh
Circuit’s view, the Third Circuit’s assumption that
“the same loss would have been suffered” if the
representations had been truthful was simply incorrect.
Id. at 1374 n. 12 (quoting United States v. Hill, 676
F. Supp. 1158, 1162 (N.D. Fla. 1987)). The district
court’s unchallenged holding in Hibbs was that the
Government would not have insured the mortgage had it
not been for the false certifications. Id. If the
representations had been accurate, the Government, in
reality, “would not have lost any money.” Id. See also
United States v. TDC Mgmt. Corp., Inc., 288 F.3d 421,
428 (D.C. Cir. 2002) (upholding the district court’s
use of a “but for” measure of damages).
5.
False Progress Reports
Defendants frequently contend that the only damage
to the United States in premature progress payment
5
cases is the time value of money. At least one
circuit, however, disagrees. In Young-Montenay, Inc.
v. United States, 15 F.3d 1040 (Fed. Cir. 1994), the
defendant made false statements in order to accelerate
payments before they would otherwise have been due
under the contract. The Federal Circuit held that the
measure of single damages was the amount paid
prematurely, since “the government was denied the use
of the overpaid money” and since, because of the
overpayment, “the contractor had less incentive to
complete the project in a timely or satisfactory
manner.” Id. at 1043 n.3. But see United States v.
American Precision Products Corp., 115 F. Supp. 823,
828 (D.N.J. 1953) (holding government does not suffer
damage if it ultimately receives the item for which it
has paid; time value of money not considered).
6.
Bid-rigging
The “measure of damages under the False Claims Act
in cases involving collusive bidding is the difference
between what the Government actually paid out to the
contractor and what it would have paid for the same
work in the competitive market.” United States v.
Cripps, 460 F. Supp. 969, 976 (E.D. Mich. 1978)
(competitive price based on actual cost and not
including defendant’s profit margin); Brown v. United
States, 524 F.2d 693, 706 (Ct. Cl. 1975) (competitive
price determined by taking contractor’s actual cost and
adding a profit margin). See also United States ex
rel. Marcus v. Hess, 41 F. Supp. 197, 216 (W.D. Pa.
1941), rev’s 127 F.2d 233 (3d Cir. 1942), reinstated
and aff’d, 317 U.S. 537 (1943) (in bid-rigging case,
evidence admitted regarding the difference in price
between fraudulent bids and fair competitive bids;
contractor’s actual costs deemed irrelevant).
7.
Defective Pricing
Many government contracts are sole-source
contracts that require the government to determine the
price of the contract based on the contractor’s own
cost and pricing information. The Truth in
Negotiations Act (“TINA”), 10 U.S.C. 2306a, governs
such contracts. Some of TINA’s features have been
applied to False Claims Act cases, including, most
notably, TINA’s “rebuttable presumption that the
Government is damaged dollar for dollar by the non6
disclosed amount once non-disclosure is shown.” See
United States ex rel. Taxpayers Against Fraud v. Singer
Co., 889 F.2d 1327, 1333 (4th Cir. 1989) (undisclosed
volume discount assumed to have full impact). The
burden is then on the contractor to show “nonreliance
on behalf of the Government in order to rebut the
natural and probable consequences of the existence of
the nondisclosed or inaccurate data.” Sylvania Elec.
Products, Inc. v. United States, 479 F.2d 1342, 1349
(Ct. Cl. 1973).
Multiple Award Schedule contracts awarded by the
General Services Administration (for purchases by
government agencies of commercially available products)
similarly require the submission of pricing information
by contractors, for the purpose of insuring that the
Government is being given the best available price by
the contractor. The measure of damages in such cases
is generally the difference between the amount paid by
the Government and the amount it would have paid had it
been charged the supplier’s lowest commercial price.
See generally United States v. Data Translation, Inc.,
984 F.2d 1256, 1266 (1st Cir. 1992).
8.
Kickbacks
In United States v. Killough, 848 F.2d 1523 (11th
Cir. 1988), the defendant paid kickbacks to state
officials in charge of administering federal funds.
The kickbacks paid totaled $577,000, and the jury
awarded $633,000 in the case. “The government
introduced the inflated invoices into evidence, as well
as testimony from other contractors who were willing to
do the work for less money and expert testimony on the
fair market value . . .” Id. at 1531. The court
determined that “[a]lthough [the amount of the
kickback] was neither a floor nor a conclusive
presumption of the measure of damages, it was relevant
as circumstantial evidence.” Id. at 1532. “Taken
together, this was more than sufficient evidence from
which the jury could have determined damages
attributable to the defendants.” Id. at 1531. The
court rejected the argument that the Government had
suffered no damages simply because honest contractors
had submitted higher bids than the collusive
contractors. Id. at 1532; see also United States ex
rel. Thompson v. Columbia/HCA Healthcare Corp., 20 F.
Supp. 1017, 1047-1049 (S.D. Tex. 1998) (in case
7
involving payment of kickbacks by one medical provider
to another where financial impact on government
unclear, conduct may still be actionable; “pecuniary
damage to the public fisc is no longer required for an
actionable claim under the FCA”).
9.
Extrapolation Cases
In some FCA cases (often involving the Medicare
program), the amount of damages is difficult or
impossible to ascertain and prove simply as a
consequence of the number of false claims submitted by
the defendants in connection with a particular scheme.
Courts have permitted proof of damages in such cases
through the use of statistical sampling. See e.g.
United States v. Cabrera Diaz, 106 F. Supp.2d 234
(D.P.R. 2000); see also United States v. Krizek, 192
F.3d 1024 (D.C. Cir. 1999); Brooks v. Department of
Agriculture, 841 F. Supp. 833 (N.D. Ill. 1994).
In the related area of Medicare overpayment cases,
courts have similarly permitted proof of damages
through statistical extrapolation. See Ratanasen v.
State of California, 11 F.3d 1467 (9th Cir. 1993)
(rejecting due process challenges to the use of
statistical extrapolation); Yorktown Medical
Laboratory, Inc. v. Perales, 948 F.2d 84, 89-90 (2d
Cir. 1991) (same); Chaves County Home Health Service v.
Sullivan, 931 F.2d 914 (D.C.Cir. 1991), cert. denied,
502 U.S. 1091, 112 S.Ct. 1160, 117 L.Ed.2d 408 (1992)
(upheld HHS' disallowance of claims based on
extrapolations from audits from a random selection of
Medicare claims); Illinois Physicians Union v. Miller,
675 F.2d 151, 155 (7th Cir. 1982) ("the use of
statistical samples had been recognized as a valid
basis for findings of fact in the context of Medicaid
reimbursement").
10.
Consequential Damages
Courts have generally held that consequential
damages are not, per se, recoverable under the False
Claims Act. See United States v. Aerodex, 469 F.2d
1003 (5th cir. 1972); BMY-Combat Systems v. United
States, 44 Fed. Cl. 141, 147 (1998). There is,
however, some debate over the definition of
consequential damages, and there are exceptions to the
general rule in cases where it is not possible for the
8
Government to prove the exact amount of its damages.
In United States v. Ekelman & Associates, Inc.,
532 F.2d 545, 550 (6th Cir. 1976), the Sixth Circuit
held that allowable damages recoverable under the Act
include those that “naturally and proximately flow from
the ‘act’ of filing a fraudulent claim under the Act.”
As the district court put it in United States ex
rel. Roby v. Boeing Co., 79 F. Supp. 2d 877, 894 (S.D.
Ohio 1999), the issue “boils down to one of causation,
specifically, proximate causation.” While
acknowledging that consequential damages are not
recoverable under the Act, the court held that “if the
Government and relator present sufficient evidence that
the damages sought are of a direct, proximate, and
foreseeable nature, then those damages may be available
to the Government and Relator under a FCA theory of
recovery.” Id. at 895.
The court also noted the
availability of damages for “incidental or maintenance”
costs resulting from a fraud, as distinguished from
“consequential damages.” Id. All these issues were
held to be questions of fact. Id.
On appeal, the Sixth Circuit upheld the district
court decision, observing that the amount “wrongfully
paid” was the amount paid in response to Boeing’s
entire claim for payment, not just the amount paid for
the defective gear. United States ex rel Roby v.
Boeing, 302 F.3d 637, 646-647 (6th Cir. 2002).
The
contract amount, however, was not the measure of
damages.5 The court held the Government’s damages
equaled “the difference between the market value of
[the helicopter] as received (zero) and as promised.”
Id. at 648. While the Government was not entitled to
damages based on the value of a new helicopter, it was
entitled to the value of a remanufactured helicopter
that met contract specifications. Id. See also United
States v. Woodbury, 359 F.2d 370, 379 9th Cir. 1966)
(government’s damages included "money spent by its
5
The court distinguished United States ex rel.
Compton v. Midwest Specialties, Inc., 142 F.3d 296, 305
(6th Cir. 1998), which awarded the contract amount as
damages, based on the fact that the Government
“apparently did not claim that its full or actual
damages were more than the contract price in Compton .
. . .”
9
employees in straightening out the mess [caused by the
false claims] and in protecting its interest
thereafter"); United States v. Ekelman & Assocs., Inc.,
532 F.2d 545, 550-51 (6th Cir. 1976) (Government
permitted to recover not only the guarantee amount but
also the reasonable expenses incurred in preserving the
properties that served as collateral for the loans).
In those cases where it is not possible for the
Government to quantify its damages, consequential
damages are explicitly permissible. In such cases, the
“replacement costs” or the “cost of remedying defects”
may be used if those costs are “not clearly
disproportionate to the probable loss in value caused
by the defects in question.” Commercial Contractors,
Inc. v. United States, 154 F.3d 1357, 1372-1373 (Fed.
Cir. 1998). "The cost of remedying defects is not
regarded as disproportionate if the defects
significantly affect the integrity of a structure being
built. In that setting, the injured party is entitled
to recover the cost of remedying the defects despite
the fact that the cost may be very high." Id. at 1372.
See also Daff v. United States, 78 F.3d 1566 (Fed. Cir.
1996) (costs incurred in testing and repairing included
in single damage calculation); BMY-Combat Systems v.
United States, 44 Fed. Cl. 141 (1998) (costs of
replacement parts, inspection and replacement and some
interest included in single damages).
B.
LIMITS ON PENALTIES AND DAMAGES
The statutory language on damages and penalties
under the FCA is mandatory. It states that any person
who violates the False Claims Act “is liable” for the
damages and penalties specified therein. 31 U.S.C.
' 3729(a). Violations of the FCA occurring after
September 29, 1999 are subject to increased penalties
of between $5,500 and $11,000. See 28 U.S.C.A. ' 2461
note (2002); 28 C.F.R. ' 85.3(9) (2000).
In general, the number of penalties under the Act
is limited to the number of demands for payment by the
Government. See United States v. Bornstein, 423 U.S.
303, 309 n. 4 (1976); United State v. Woodbury, 359
F.2d 370 (9th Cir. 1966). But see United States v. Zan
Machine, 803 F. Supp. 620, 624 (E.D.N.Y. 1992)
(penalties assessed based on the number of false
records).
10
In cases where defendants are conducting business
indirectly with the Government, the number of penalties
may be determined by the number of fraudulent acts by
the defendant, which may or may not necessarily
coincide with the number of resultant payment demands
on the Government by the company conducting business
directly with the Government. See Bornstein, 423 U.S.
at 313 (penalties assessed against subcontractor based
on number of deliveries by subcontractor; not based on
number of claims made against the Government by the
prime contractor).
1.
Constitutional Limits on Penalties
In cases involving large numbers of claims,
constitutional limits have sometimes been placed on the
number of available penalties.
a.
Double Jeopardy Clause
Historically, the only constitutional limit on
penalties was derived from the Double Jeopardy Clause.
In United States v. Halper, 490 U.S. 435 (1989), the
Supreme Court reasoned that, in cases where the
defendant had a prior criminal conviction, a large
penalty award under the FCA could effectively amount to
punishment and thus violate the Double Jeopardy Clause.
In Hudson v. United States, 522 U.S. 93 (1997),
however, the Supreme Court reconsidered Halper and
rejected its “punitive versus non-punitive” framework
for evaluating penalties. The issue was whether they
were criminal or civil. The Court concluded that civil
penalties could only be considered criminal in effect
if Congress intended them to be so, or the “clearest
proof” demonstrated they were “so punitive in form and
effect as to render them criminal despite Congress’
intent to the contrary.” Id. (internal citation
omitted). Civil False Claims Act penalties would
plainly never meet the foregoing standard and thus
cannot present a basis for a Double Jeopardy violation.
Notably, however, the Court also noted that “the Due
Process and Equal Protection Clauses already protect
individuals from sanctions which are downright
irrational,” and “the Eighth Amendment protects against
excessive civil fines, including forfeitures.” Id. at
103. This observation presaged the Court’s subsequent
11
analysis of these same issues.
b.
Excessive Fines Clause
The Eighth Amendment provides: "Excessive bail
shall not be required, nor excessive fines imposed, nor
cruel and unusual punishments inflicted." U.S. Const.,
Amdt. 8.
In United States v. Bajakajian, 524 U.S. 321
(1998), the Supreme Court applied the Excessive Fines
clause for the first time, in a case involving a
forfeiture for failure to report currency. The Court
examined two issues in determining whether the sanction
violated the Excessive Fines Clause: First, the Court
examined whether the forfeiture was punitive, then,
upon concluding that it was, evaluated whether the
forfeiture was excessive. On the latter issue, the
Court held “a punitive forfeiture violates the
Excessive Fines Clause if it is grossly disproportional
to the gravity of the defense it is designed to
punish.” Id. at 322.
Four factors were relevant to the Court in
evaluating the gravity of the defendant's offense: (1)
the severity of the violation; (2) whether the crime
was related to any other illegal activities, (3) the
maximum criminal penalty the defendant might have
faced, and (4) the harm caused by the violation.
Bajakajian, 524 U.S. at 337-40.
Subsequent to Bajakajian, the Ninth Circuit held
in United States v. Mackby, 339 F.3d 1013 (9th Cir.
2003) that an award of $174,454.92 in treble damages
and $550,000 in penalties was not excessive under the
Eighth Amendment. While the court did not consider the
Bajakajian factors a “rigid set of factors,” it did
reference them in its decision. Id. at 1017.
The Court of Appeal first pointed to the fact
that, unlike the defendant in Bajakajian, Mackby was
“among the class of people targeted by the Act.” Also,
while Mackby was assessed $550,000 in penalties, he had
committed a total of 8499 violations of the Act. Id.
at 1018.
In comparing the penalties and damages awarded
against Mackby to the potential criminal sanction for
12
the conduct, the court observed that the criminal
sanction could conceivably have been worse - several
years of jail time and restitution for the full amount
of the fraud. Id. Also relevant was the fact that the
defendant’s conduct – falsely representing himself as a
licensed medical provider - harmed the Government, both
in the form of monetary damages and harm to the
administration and integrity of Medicare. Id. at 10181019.
Lastly, the Court noted that “some part of the
judgment against Mackby [was] remedial.” Id. Relying
on United States v. Bornstein, 423 U.S. 303, 314
(1976), the Ninth Circuit observed that the preamendment version of the Act – which called for double
damages and $2,000 in penalties per false claim – had
been deemed “largely remedial” by the Supreme Court.
Id. at 1019. Accordingly, it held that “at least some
portion of the award that was over and above the amount
of money actually paid out by the government was
similarly remedial.” Id. In the end, the Court of
Appeals thus upheld the award of penalties equal to 9.5
times the amount of single damages. See also United
States v. Byrd, 100 F. Supp. 2d 342 (E.D. N.C. 2000)
(in case with $85,012 in damages, court awarded $1.3
million in penalties -- more than 15 times single
damages); U.S. v. Advance Tool Co., 902 F. Supp. 1011,
1018 (W.D. Mo 1995) (court awarded $365,000 in
penalties in case with zero damages and $3,430,000 in
possible penalties available); Hays v. Hoffman, 325
F.3d 982, 993-994 (8th Cir. 2003) ($1.68 million in
penalties reduced to $80,000 in case involving $6,000
overcharge; while Excessive Fines Clause not the basis
relied upon for the reduction, court noted district
court’s decision was “laced with Excessive Fines Clause
implications”).6
C.
TREBLE DAMAGES
No case has ever held that treble damages under
6
As of this date, no court has applied the Due
Process clause to limit the award of penalties under
the False Claims Act. But see State Farm Mutual
Automobile Insurance Co. v. Campbell, 538 U.S. 408, 410
(2003) (“in practice, few awards exceeding a single
digit ratio between punitive and compensatory damages
will satisfy due process”).
13
the FCA violate the U.S. Constitution. In Vermont
Agency of Natural Resources v. United States ex. rel.
Stevens, 529 U.S. 765, 784 (2000), the Supreme Court
described treble damages under the False Claims Act as
“essentially punitive in nature.” In Cook County v.
United States ex rel. Chandler, 538 U.S. 119, 130
(2003), however, the Court clarified its statement in
Stevens, observing that “treble damages have a
compensatory side, serving remedial purposes in
addition to punitive objectives.” The Court thus held
that the FCA’s treble damages provision “certainly does
not equate with classic punitive damages.” Id. at 132.
See also United States v. Mackby, 261 F.3d 821 (9th
Cir. 2001) (treble damages in combination with large
penalty awards may potentially be limited by the Eighth
Amendment’s prohibition against excessive fines and
penalties).
1.
Calculating Treble Damages - Credits
After a payment has been made on a false claim,
defendants will sometimes reimburse the falsely claimed
amount or the government will otherwise mitigate its
damages. In such cases, treble damages are still
calculated in the same fashion (i.e., based on the
damage resulting from the initial false claim) and the
amount recovered by the Government is simply credited
against the trebled amount. See United States v.
Ekelman Associates, Inc., 532 F.2d 545, 550 (6th Cir.
1976).
D.
VOLUNTARY DISCLOSURE
A defendant=s exposure for damages under the Act
may be limited to double damages plus costs under the
following circumstances:
(A) the person committing the violation
of this subsection furnished officials
of the United States responsible for
investigating false claims violations
with all information known to such
person about the violation within 30
days after the date on which the
defendant first obtained the
information;
(B) such person fully cooperated with
14
any Government investigation of such
violation; and
(C) at the time such person furnished
the United States with the information
about the violation, no criminal
prosecution, civil action, or
administrative action had commenced
under this title with respect to such
violation, and the person did not have
actual knowledge of the existence of an
investigation into such violation;
31 U.S.C. ' 3729(a).
E.
INDEMNIFICATION
Cross-complaints by defendants seeking
indemnification or contribution by relators are
generally disfavored. In Mortgages, Inc. v. United
States District Court, 934 F.2d 209, 212 (9th Cir.
1991), the Ninth Circuit reversed a district court
decision permitting the defendants to pursue such
claims against the relator. The Court of Appeal
reasoned that permitting such claims would contravene
the Act’s fundamental purpose of motivating even
culpable relators to blow the whistle. Id. at 213.
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